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GIBRALTARAug/Sept/Oct 2014

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News p6GDP growth faces effect of UK gaming legal challenge

Budget p8Gibraltar Budget 2014 – Tax Measures

Funds p10AIFMD – One Year On

Funds p12Capitalising on EU

IPOs p16London Calling – Is Your Company Ready

Aug/Sept/Oct 2014 Volume 20/ Number 3

Published by Gibraltar International Publications Ltd.G7 Cornwall’s CentrePMB 104, PO Box 561Gibraltar

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Contents

4 Gibraltar International www.gibraltarinternational.com

Underpinning the financial services

G ibraltar’s rapid economic expansion – nominal Gross Domestic

Product up over 10% (8% real) to £1.4bn - is certainly

praiseworthy, but of course, must be seen in the context of a

small economy compared with other European jurisdictions.

Financial services and gaming account for a whopping 45% of GDP,

with the latter having emerged from being classified under “other” in the

2006-07 (unpublished) input/output study, to its present 25%. As such it is

the largest single pillar of Gibraltar’s economy, but faces an uncertain

future as regards contribution, as a result of disputed new tax and licensing

reforms by the UK that are up for legal challenge from local e-Gaming

companies this summer.

It is therefore ever more important that financial services, as the other

principle contributor made up of insurers, fund managers, trust and other

private client activities, lawyers, accountants and administrators, continues

to expand.

Government moves to grow the market, helped by the private sector,

are starting to pay real dividends with both insurers and funds making a

play of Gibraltar’s easy access to Europe and low cost operating

environment.

But success depends on still greater awareness of the Gibraltar

offering and promoting the jurisdiction’s all-important high regulatory

standards.

Editorial Comment It is therefore, heartening to see two new measures being taken by the regulator to secure Gibraltar’s reputation as a global financial centre of choice.The Financial Services Commission chief executive Samantha Barrass, has

fired a warning shot across the bows of the funds sector in a bid to ensure there

is good consumer protection so that Gibraltar’s hard-won reputation for high

standards in financial services is not at risk.

In particular, she had her sights set on the highly appealing process of

allowing licenced EIF (Experience Investor Funds) Directors to pre-authorise

funds, which allows the jurisdiction to promote itself as “fastest to market”, and

seen as essential to help grow the sector.

Mrs. Barrass, who took over as the Gibraltar Regulator in February,

emphasised it was a few, not all, funds examined that had given rise to concern,

and she aimed her remarks specifically at EIF Directors, who may not always

be giving sufficient emphasis to risk management. This is particularly true

when the term ‘experienced investor’ is open to broad interpretation and where

there may be “funds with less experienced, experienced investors particularly

when the investments are illiquid and / or esoteric”.

The government and funds sector rushed to support her surprise statement,

but emphasised that the three weeks pre-authorisation process must, and will,

go on.

The second FSC initiative is in relation to the fast-growing pensions

business in Gibraltar, where there is little history, particularly with regard to the

ever-changing QROPS business arising from transfers out of the UK. Seeking

to extend regulatory control will give comfort to consumers and encourage the

sector to ensure continuous, relevant staff training.

Mrs. Barrass’ “fresh pair of eyes” is timely for financial services that

account for a fifth of Gibraltar’s economy, which – in the event of any problem

and being small - is likely to be given greater emphasis than a similar issue in

a large jurisdiction. Ray Spencer

Marine Services p18Super yachts on the radar for Red Ensign registration

Banking p21New ventures to meet growing need

Insurance p24Motor rates to harden amid insurer woes

Pensions p26Tightening rules for ‘exemplary’ pensions home

Business round up p28

No part of this publication may be reproduced without the written

permission of the publishers.

DisclaimerGibraltar International Publications Limited have tried to ensure that all

information is accurate, but emphasise that they cannot accept responsibility

for any errors or omissions, and that they accept no responsibility for

statements made by contributors or for any claim

made in an advertisement.

© 2014 Gibraltar International Publications Ltd.

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W ith more investment still to come,Gross Domestic Product (GDP)“can now confidently be expectedto accelerate”, Chief Minister Fabian Picardo

told Parliament when presenting his third

Budget at end-June. The economy would

exceed his commitment to reach £1.65bn

GDP in 2015-16.

The nominal GDP result to end-March

2014 translates into an 8.3% rise to £1.132bn

year-on-year in ‘real’ GDP, the measure

taking into account the effects of inflation

(reckoned to be 1.8% in the period) and used

by most other countries to indicate progress.

Financial services and e-Gaming

together make up some 45% (£635m) of the

expanded economy, with the gambling share

up from 21.6% last year to 25% now!

Employment in both sectors was up with the

combined total of just over 6,000 jobs

accounting for 28% of overall employment.

Government revenue from gaming

operators again rose in 2013-14 to reach

£62.4m, with PAYE 25% higher and

corporate tax an impressive 63% up, princi-

pally attributed to four of the 23 licenced

gaming operators. Gambling duty reduced

slightly, the result of consolidation.

However, ministers are preparing for the

e-Gaming sector to go into reverse as a result

of UK government measures to introduce a

hotly contested point of consumption tax and

more open licencing regime, which Albert

Isola, the Minister responsible said:

“Individually and collectively, have serious

weaknesses in their development and

delivery, and have the capacity to cause

irreparable harm to what is currently a world

leading industry in Gibraltar”.

Legal deadlineGibraltar gaming operators are threatening

to seek a Judicial Revue of the UK gaming

intentions, and it is understood £2.5m has

been set aside for the legal challenge. UK

specialist lawyers have been appointed, UK

ministers contacted and a late July deadline

given for a response before action.

Isola told Parliament: “We must be

prepared for, and be sufficiently flexible to

accommodate, steps back. Although, even at

this very late stage in the development of the

UK Government’s proposals, their impact on

the Gibraltar based industry is very unclear.”

He added: “I cannot understate the

importance of this sector to our community.”

Both financial services and e-gaming were

“of enormous importance”.

How other sectors of the economy –

shipping & transportation (previously 10%),

tourism (20%), financial services (20%),

construction (10%) and government (20%) –

have been affected by gaming’s higher share

remains unclear, but both tourism and the

Port have been under pressure.

The Port faced greater competition from

neighbouring Algeciras and Tangier,

particularly on ship refueling, so new

financial stimulus measures are designed to

reverse a “moderate” decline in bunkering

activity that began in 2008 with the global

economic crisis. Even so, revenue from

bunkering was up by a fifth and port activity

achieved a £1.3m surplus.

The effect of greater numbers of cruise

ships and passengers visiting the port and

landing by air, were offset by a 13% fall over

5 months to end May in cross-border visitors

related primarily to publicity surrounding

Spain’s much-increased frontier customs

activity.

Growing Sterling strength benefits

British holiday makers and those who work

in Gibraltar and live in the Eurozone, but

makes “the shopping experience in Gibraltar

also not so affordable”, leading Picardo to

warn: “Local traders may need to adjust

pricing as a result to remain attractive to

national and international consumers.” A raft

of import duty reductions is designed to

provide a financial cushion for retailers.

Overall tourism receipts last year were down

only 1.6%.

Construction has seen a big rise, with

the building of 1,000 affordable homes - due

to be completed in late 2015 - and other

capital public projects together amounting to

£128m; a further £120m investment is

News


allocated for the current year.

To encourage private sector construc-

tion, the government last year offered tax

breaks for office buildings started by end-

March 2015 and, partly as a result, work was

expected to start by end-July on the £45m

Gibraltar World Trade Center project by

Ocean Village and a town centre £50m

Marriott Hotel and associated office block.

Now the government is extending the

tax saving measure to developments of high

value accommodation started before

December 2015. The Chief Minister

reasoned: “In the same way as Gibraltar

needs affordable homes for our people, we

also need to stimulate the market in high end

homes for those who wish to re-settle in

Gibraltar.”

Business costs cutDescribing it as a “game changing

budget”, Picardo insisted: “These are

exciting times for businesses in Gibraltar”.

Social insurance, electricity and water

charges are being held – the third successive

year for utilities - and higher discounts

(from 10% to 15%) for early rates payment

by offices, workshops, construction and

manufacturing, and transport and distribu-

tion industries. A 65% first year reduction is

available to companies new to Gibraltar,

while £250,000 is available to them for

secured loans at competitive rates.

Personal tax has been reduced to a

maximum 20%, whilst the standard tax rate

on trust income for Gibraltar residents is cut

from 30% to 10%.

In the year to March, Government

revenue reached an estimated £545m, aided

by a 20% rise in corporation tax to £78m and

PAYE by about 8% to reach £136m. But for

the current year, there’s a “very conservative”

revenue rise of only £3m predicted.

Departmental expenditure ended the

year less than 5% above estimate for 2013-14

at £411m, and the year ended with a record

£65m surplus after other costs, such as

health, government owned companies, were

applied. But Picardo is “projecting a

recurrent budget surplus of around £34m” for

2014-15. Cash Reserves were estimated at

£96m at 2013-14 and net public debt was

25% of GDP.

Aiming to attract entrepreneurs,

Picardo remarked: “We are not just relying

on established industries and established

standards”, and revealed the government was

trying “to establish new industries with

innovative thinking.”

GDP growth faces effect ofUK gaming legal challengeGibraltar’s economy grew by 10.3% to reach £1.41bn in a year, principally fromexpansion of the e-Gaming sector, continuing success of financial services,and the early results from investment of £128m in construction projects,reports Ray Spencer

Simple and cheaper tari�s for our mobile customers roaming within the European Economic Area

EEA roaming charges e�ective 1 July 2014

Outgoing calls to any EEA member from £0.20 to £0.15 per minute

Incoming calls reduced from £0.05 to £0.04 per minute

When roaming in non-EEA countries, tari�s are dependent on distant operator charges and charges may be signi�cantly higher

Outgoing SMS to any EEA member reduced from £0.06 to £0.04 per message

Data usage reduced from £0.38 to £0.16 per MB

20052200 - www.gibtele.com - [email protected]

Travelling within the EEA this

summer?

Austria - Belgium - Bulgaria - Croatia - Cyprus - Czech Republic - Denmark - Estonia - France - Finland - Germany - Greece Hungary - Iceland - Ireland - Italy - Latvia - Liechtenstein - Lithuania - Luxembourg - Malta - Netherlands - Norway - Poland

Portugal - Romania - Slovakia - Slovenia - Spain - Sweden - United Kingdom

On 30th June, Gibraltar’sChief Minister announcedhis budget measures for2014/15. Although a long and

lively speech, there were few

surprises for taxpayers.

Corporate taxThe standard rate of tax remains at 10%, with

no changes announced in the tax system.

Personal taxTwo alternative methods remain, the system

that most benefits the taxpayer being the one

that applies.

Gross Income Based System (GIBS)

Most taxpayers use this system, designed so

that the effective (overall) tax rate is never

more than 25%, and with decreasing tax rates

above taxable income of £700,000, for

example:

Total taxable income Effective tax rate£25,000 17%£50,000 22%From £105,000 to £500,000 25%£1,000,000 19%

Income above £1m is taxed at a flat 5%.

Although the original idea was that

GIBS would have no deductions or

allowances, some deductions have been

introduced in recent years:

New for 2014/15:

l· £3,000 over two years for the installation

of solar boilers

l· Private medical insurance - £2,500

Increases:

l· Approved expenditure on a new home -

£6,000 up from £5,000

l· Contributions to approved pension

schemes - £1,200 (previously £1,000)

Allowance based system (ABS)

The Government continues to favour the ABS

in terms of tax rate reductions. This is a more

traditional system with allowances, but

higher tax rates:

Taxable income band Rate appliedFirst £4,000 15% (no change)£4,001 to £16,000 18% (2013/14 – 24%)Over £16,000 40% (no change)

Changes announced to allowances include:

Personal allowance £3,100 (was £3,000)

Spouse allowance £3,100 (was £3,000)

Nursery school (per child) £4,000 (was £3,000)

Parent of disabled person £6,000 (was £5,000)

Blind person’s allowance £4,000 (was £3,000)

Single parent allowance £4,000 (was £3,000)

Medical insurance – up to £4,000

(was £2,000)

Installation of solar boiler £3,000 over 2 years

- new

Persons with income of up to £10,500

(previously £10,000) are taken out of the tax

net, by a Low Income Earners Allowance.

Generous allowances relating to the

ownership of main residential property in

Gibraltar remain unchanged. A total of

£15,500 of allowances are given in respect of

first-time purchase (£4,000 of which must be

spread over 4 years), also allowances are

given for interest on mortgages of up to

£350,000 (and even higher for pre 1 July

2008 loans).

Social insurance

Social insurance remains unchanged - capped

at a maximum of £3,023 in total for an

employee’s and employer’s contributions per

annum.

HEPPS & HNWIs

Concessions available to High Executives

Possessing Specialist Skills and High Net

Worth Individuals (Category 2) are

unchanged, although a review of the

Category 2 “product” was announced.

TrustsThe rate of tax applying to trusts has been

reduced from 30% to 10%.

Budget


RatesDiscount for the early payment of rates by

businesses has been increased from 10% to

15%. Discount in connection with the smok-

ing ban for bars and restaurants, was extend-

ed until September 2015. Early payment dis-

count for new start-ups was increased from

50% to 65% for the first year of trading.

Construction of office accommodationLast year the budget introduced a new

Capital Allowance deduction for the con-

struction of office accommodation in

Gibraltar – 30% of construction costs in 1st

year following completion, with the remain-

ing 70% over the next 7 years. This has

been extended to the development of high

value accommodation.

Import and excise dutiesSome consumer-friendly reductions in

import duty were made:

Changes From To↓ works of art 12% 0%↓ LED lighting 12% 0%↓ jewellery 6% 4.5%↓ loose gemstones 12% 0%↓ mobile phones & sunglasses 3% 0%↓ seagoing vessels under 18m 6% 0%↓ pet foods, musical instruments, writing instruments, paper-based stationery, umbrellas & fertilizers 12% 0%↓ natural & cultured pearls 12% 4.5%

There was no change to duty on fuel, or

cigarettes - the latter having increased during

the year.

Stamp dutyFor first and second-time buyers, no Stamp

Duty is now payable on the first £250,000 of

the cost of their property. This removes a

distortion in the property market as a pur-

chase of up to £250,000 by a first or second-

time buyer was exempt from Stamp Duty, but

as soon as that limit was breached, Stamp

duty applied to the full purchase price.

Gibraltar Budget 2014– Tax Measures

By Neil Rumford, Tax Partner, EY Limited

www.ey.com/gi

One year ago, on 22 July 2013, the Alternative Investment FundManagers Directive (AIFMD and/orthe “Directive”) became EU law. AIFMD

introduced harmonised requirements for

entities involved in the management of

alternative investment funds (AIFs) that are

managed and/or marketed to professional

investors in the EU.

In terms of scope, AIFMD encompasses

all EU AIFs and their managers (AIFMs) as

well as all non-EU AIFMs that market to

investors in the EU. AIFMD is wide reaching

covering all possible strategies and legal

forms and, as such, encompasses convention-

al “trading” funds (trading equity, options,

derivatives and such like) to alternative assets

classes such as real estate and private equity.

The impact of AIFMD on most existing

AIFMs was deferred by a one year transition-

al period which ended on 22 July 2014 after

which AIFs managed and/or marketed in the

EU must be compliant with the Directive,

unless a relevant exemption applies.

It is estimated that there are more than

1,200 firms caught by the Directive across

Europe, with the largest number of firms

based in the UK. The UK regulator, the

Financial Conduct Authority (FCA) expects

to receive in the region of 800 applications for

AIFM authorisation. The actual number of

AIFMD approvals across Europe has been

low by comparison. Up until recently, less

than 500 firms had been authorised in the UK,

Ireland, Luxembourg, France, Germany and

other jurisdictions throughout the EU.

Despite the requirement to do so it is believed

a large number of AIFMs have not yet sub-

mitted an application to their regulator. It

now seems inevitable that a large number of

managers will not be authorised by 22 July

2014 and, whilst not required by the

Directive, it remains to be seen whether there

are unintended consequences for managers

that are not authorised.

What should you do if you arean AIFM that is not authorisedThe Directive requires that where an AIFM

is unable to ensure compliance with the

requirements of AIFMD it shall immediate-

ly inform the competent authorities in its

home Member State and, if applicable, the

competent authorities in the host Member

State of the AIF concerned. The competent

authorities of the home Member State of the

AIFM shall require the AIFM to take the

necessary steps to remedy the situation.

If non-compliance persists, and in so far

as it concerns an EU AIFM or an EU AIF, the

competent authorities of the home Member

State shall require that it resigns as AIFM of

that AIF. In that case the AIF shall no longer

be marketed in the EU. If it concerns a non-

EU AIFM managing a non-EU AIF, the AIF

shall no longer be marketed in the EU.

If you are an AIFM and you are not yet

authorised you should carefully consider your

options of which there are principally two; (a)

seek an exemption from the scope of AIFMD,

or (b) become compliant.

Exemptions from the scope of AIFMDThere are several exemptions to the scope of

the AIFMD, the main of which being the de

minimus test of an AIFM with aggregate

total assets of (a) less than €100 million

(including leverage); or (b) less than €500

million (unleveraged) and that does not have

redemption rights during a period of five

years following the date of initial investment

in the AIF. Such AIFMs are referred to as

“Small AIFMs”.

Become compliantAIFMs operating under existing licenses

should seek authorisation for a variation

of permission from their regulator.

Organisations acting as AIFMs, that have

not previously been authorised, should sub-

mit an application for authorisation to their

regulator. In terms of authorisation, AIFMD

sets out rules that include but are not limited

to conduct, capitalisation and insurance

requirements. AIFMs are required to

undertake portfolio management and risk

management functions (one of which can be

Funds


delegated under certain circumstances). As

with all EU directives, there is a certain

amount of complexity and legality to be

observed.

The Gibraltar solutionGibraltar is fully compliant in respect of EU

investment business and fund legislation.

The Gibraltar regulator, the Financial

Services Commission (FSC) and the fund’s

industry have been gearing up for AIFMD

for years.

Gibraltar based investment firms that

comply with AIFMD have access to an EU-

wide marketing passport that permits

promotion and marketing across the EU.

This provides Gibraltar AIFMs access to a

market of in excess of 500 million people.

Gibraltar also has the fastest AIFMD

fund product to market with its experienced

investor fund (EIF) regime whereby an

AIFM can start marketing an EIF from the

launch so long as within 10 business days it

submits all relevant documentation to the

FSC. The EIF is extremely flexible with no

restrictions on asset type, diversification,

investment nor borrowing. With unrivalled

speed to market and flexibility, the EIF is one

of the most popular fund vehicles in the EU.

Although AIFMD implementation

requirements are similar across the EU, it is

expected that the cost of implementation may

vary from one EU jurisdiction to another.

Running costs are low for Gibraltar AIFMs

compared to operations based in other EU

jurisdictions which are already seeing

costs increase as a result of AIFMD

implementation.

In addition to this, Gibraltar is also soon

to launch a Small AIFM regime which will

bridge the regulatory gap between Small

AIFMs and fully in scope AIFMs.

Gibraltar’s Small AIFM regime will provide

a platform for managers to enter into the EU

regulatory environment without the burden

of the full AIFMD scope requirements. The

Small AIFM regime will provide further

depth and support to an already strong

Gibraltar AIFMD offering.

One year on, Gibraltar has the

legislation, rules, regulations and products in

place in order to meet the requirements of

AIFMD. If you are the one of many AIFMs

that are struggling with AIFMD implementa-

tion look no further than Gibraltar.

AIFMD – One Year OnAdrian Hogg is a director of the Grant Thornton GibraltarGroup of Companies. He is a former GFIA Chairman and aspecialist in investment business with over a decadesexperience involving various investment business structures in Gibraltar and the Caribbean

www.grantthornton.gi

COMPLIANCE • VAT

TAX • TRUSTS • eGAMING

AUDIT • TAX • ADVISORY

TAX • AML • AUDIT

FATCA • ANTI-BRIBERY & CORRUPTION • GIBRALTAR

PLANNING • FATCA

FUNDS • BANKING • CORPORATE SERVICES • INSURANCE • FUNDS • BANKING • CORPORATE

INING • BANKING • INSURANCE • FUNDS • BANKING • INSURANCE • CORPORATE SERVICES

FUNDS • BANKING • CORPORATE SERVICES • INSURANCE • FUNDS • BANKING • CORPORATE

NCY II • BASEL II • AIFMD • POCT EGAMING • TELECOMMUNICATIONS • HOSTING • eBUSINESS

HOSTING • eGAMING • eBUSINESS • TELECOMMUNICATIONS

MERGERS • ACQUISITIONS • DUE DILIGENCE • VALUATIONS

PEOPLE & CHANGE • PERFORMANCE • SKILLS • TRAINING

GLOBAL NETWORK • LOCAL OWNERSHIP • INTERNATIONAL REGULATION

SERVICE • COMMITMENT• PASSION • KNOWLEDGE • GROWTH • GLOBAL NETWORK

FUND • TAX • SERVICE • COMMITMENT• PASSION • KNOWLEDGE • PERFORMANCE • SKILLS

MITMENT • SERVICE • PASSION

EGAMING • GIBRALTAR

COMPLIANCE • ANTI-BRIBERY & CORRUPTION • eGAMING

FATCA • COMPLIANCE • VALUATIONS

ORATE SERVICES • INSURANCE • FUNDS • BANKING • CORPORATE SERVICES • INSURANCE

TRUSTS • INSURANCE • SOLVENCY II • AIFMD

DUE DILIGENCE • VALUATIONS • MERGERS • ACQUISITIONS

TWORK • LOCAL OWNERSHIP • INTERNATIONAL REGULATION • TRAINING •

BANKING • TAX • TRUSTS

PASSION • SERVICE • COMMITMENT

FATTCCAA • AANTTI-BBRRRIBBERYY && CCOORRRRRUU

FUNNDSS • BANKKING •• CORPOORRATTE SSERRVIICEES • INSSUUURAA

NINGG •• BAANKINNG • INNSUR

UNDDS • BAANKING • CORPPORRAATEE S

EGGAAMMINGG • TTELECOOOMMMMUUNNNICCAATTIOONN

HOOSSTING • eGGAMMINNNGG • e

MERRGGERRS • AACQQUUISITIIOONNSS • DD

PEOOPPLE & CCHANNGGEE • PERRRFFO

GLLOBAAL NEETWORK • LLLOCCALL OOWWWNNERS

SERVVICEE • COOMMMITMEENTT•• PAASSSIOON • K

FUNNDD • TTAAX • SSERVICE • CCOO

COOMMPLIAANCEE • AANNNTII-BBRRIBB

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The Alternative Investment FundManagers Directive (AIFMD)introduced last year, but which camefully into force mid-July, is set to bolster EU

fund jurisdictions such as Gibraltar, that are

able to offer foreign fund managers access to

the whole of Europe.

The EU-wide AIFMD provides for

monitoring and supervision of risks posed by

alternative investment funds, including hedge

funds, private equity funds, and real estate

funds.

“In this new environment, with signifi-

cant opportunities available to professional,

focused jurisdictions, Gibraltar has positioned

itself to maximise business opportunities

under AIFMD”, pointed out James Lasry,

Gibraltar Funds & Investment Association

(GFIA) now-retired chairman.

For funds being established now, “or

funds that wish to continue to market in the

EU – particularly those wishing to market in

Germany, France, Italy and the Netherlands,

where the private placement regimes have

been substantially restricted – they will have

to consider a European onshore option and,

depending on size, AIFM-compliant

structures,” said Jon Tricker, Partner at

Deloitte (Gibraltar).

Moves by Gibraltar lawyers, account-

ants and other financial intermediaries to

attract funds business have been in place for

the past few years, but the number registered

as Experienced Investor Funds (EIFs)

remains doggedly below 100 – small beer by

comparison with other main competing cen-

tres such as Malta, Ireland and, particularly,

Luxembourg.

As Joey Garcia, acknowledged fund

expert at law firm Isolas, explains, that the

near-static number does not signify inactivity.

“Some funds have been completed or been

unable to reach investment targets, whilst

other funds have been launched in their

place”, he said. A couple of funds have

recently relocated to Cayman Islands, to

avoid AIFMD reporting requirements for

funds with over £100m assets.

“But I agree the full potential growth

has not yet been realised; the AIFMD is a

positive event for us going forward,” Garcia

remarked. He and Lasry point to government

investment – “time, effort and resources”

- in funds promotion at an expanded

and renamed government-funded Gibraltar

Finance.

The boost in jurisdiction visibility at

global funds events in Paris, Hong

Kong, Geneva, Monaco and London

this year, contrasts sharply with a

previous relatively low-key interna-

tional presence, and begins to match

the efforts made by Guernsey and

Malta, for example.

Philip Canessa, Gibraltar

Finance Centre funds marketing

specialist believes the territory is “in

an excellent position” to experience

growth, after its dedication to

implementation and preparation of

regulations like AIFMD.

To make The Rock more funds

friendly, the government in 2012 cut by half,

requirements for individuals to qualify for

investment in EIFs. Last year Gibraltar

altered legislation permitting large funds to

register locally, but still use their preferred

administrators in other well-regulated

jurisdictions and earlier this year made

changes to the Companies Act to assist

administrators reporting changes in share-

holder / investor ownership.

In early May, 27 fund managers new to

Funds


Gibraltar attended a London briefing by

lawyers, Hassans and accountants, Deloitte

(Gibraltar), as part of a series of joint promo-

tional events in addition to those with the

Finance Centre. The fund managers had been

identified as likely soon to structure new fund

offerings; within days two planned to find out

more.

Fast to marketHowever, Hassans funds specialist partner

Lasry, revealed: “It’s a struggle to get the

attention of fund advisors, because they

keenly support Cayman Islands that they

know well, unlike fund managers, who are

much more open to Gibraltar possibilities.

“I think we have the most competitive

offering for AIFMs in Europe, if they had to

find a European jurisdiction in which to put

funds instead of Cayman Islands. Those

based in London we hope will consider

Gibraltar because it is close – culturally,

legally and regulatory - to that in Cayman,

and in addition, we offer the quickest to

market in Europe,” Lasry asserted.

Feedback from Invest’tour Gibraltar, a

first-of-kind 2-day seminar attended by 48

Swiss wealth management investors in

April revealed “attendees were especially

impressed by the mood that prevails in the

territory - very much business oriented and

solutions driven”, according to organiser

Voxia Communications senior partner,

Alexandre Bonnard.

Few attendees had previous knowledge

and experience of the territory, showing “that

more could be done in terms of dedicated

communication towards the Swiss financial

intermediaries and independent advisors and

asset managers”, Bonnard told Gibraltar

International. A follow-up event is planned

for later this year.

Swiss move symbolicGarcia revealed: “At least two serious Swiss

enquiries concerning establishment of

investment management firms have been

received” with high expectation they will

shortly progress. “It won’t be a huge change

to our market, but it is symbolic of Swiss

firms seeking to become regulated for

marketing in Europe,” he explained.

There are ten Gibraltar licensed fund

administrators with some £3.7bn of assets in

around 218 local and foreign funds, but with

sub funds – separate cells with the impact of

each protected from each other – the number

rises to around 250 funds.

Capitalising on EUGibraltar will have been represented at nine major funds events inseven international cities in 2014 – twice the number attended lastyear – to promote the jurisdiction as the best EU-gateway toEurope with rapid regulatory approval of funds

Continued page 14

Gibraltar Finance Centre in April joined

Europe’s industry elite at EuroHedge Summit

in Paris which “was very good, because of the

seriousness of the managers represented – top

Euro managers – which some might argue are

too big for Gibraltar, but we were surprised at

how many delegates showed interest in our

offer”, Lasry reported.

“They may not have wanted Gibraltar

for a fund now, but they may well find us suit-

able in the future. Rather than looking to

Luxembourg, they will get from Gibraltar

both a lot better service and access to

the Regulator for speed of processing

applications, as well as a cost advantage.”

Nicola Smith, CEO of Helvetic Fund

Administration Ltd, which manages 80 funds

in the Cayman and British Virgin Islands, as

well as Gibraltar. The company became the

first licensed Gibraltar funds administrator in

1998, and holds a similar position in Malta.

Smith notes that whilst Ireland and

Luxembourg offer similar tax advantages to

Gibraltar, those jurisdictions lose on the

grounds of difficulty in getting funds

Funds


established.

“Dublin is saturated with funds and the

process of launching a fund with regulatory

approval there can take up to a year and

in Luxembourg it can be even more

problematic, because of the cost – both juris-

dictions are way more expensive - and, basi-

cally, they seem to be interested only in very

large funds”, she said. “Malta offers an

underlying structure for funds similar to

Gibraltar’s EIF, but it can take six months to

get regulatory approval.”

Ray Spencer

Gibraltar’s Financial Services Commission (FSC) chief executive,

Samantha Barrass is looking again at the key Experience Investor Fund

(EIF) process that allows funds to be pre-authorised by industry profession-

als.

The EIF regime means funds can be launched within just ten days of

its application submission unless the FSC spots something amiss, enabling

the jurisdiction to market itself strongly on an internationally competitive

‘fastest to market’ basis.

However, it’s a process the regulator regards as “very unusual”,

because the prior approval is of licensed EIF Directors only – there are 90

listed as ‘active’ at present; the FSC registers the fund “after it is up and

running”.

Gibraltar Minister for Financial Services, Albert Isola, emphasised: “I

don’t think there is any chance that the pre-authorisation of funds process

will be disturbed, but if we can improve on it, then that is only right.

“Do not be surprised by the approach being taken by Samantha

Barrass; it is entirely within her scope to review the process - she has a duty

to consider and to review the EIF process”, he told some 200 people

attending the Gibraltar Funds & Investment Association (GFIA) 2nd annual

dinner at end-May.

Nevertheless, retiring GFIA chairman James Lasry, admitted: “The

new Regulator’s remarks have caused a bit of a stir, but they have been

received by the industry positively. We regard our ability to launch funds

without prior FSC authorisation as a privilege, not a right and we always flag

up to the Regulator anything that is of an unusual or different nature.”

Around 10% of Gibraltar’s nearly 200 EIFs and EIF sub funds are

believed now to be causing the FSC team some concerns, Gibraltar

International understands. The regulator has been worked in recent months

with EIF directors in funds considered ‘problematic’. “We are looking at

new and existing funds and whether we have any concerns,” Mrs Barrass

revealed.

As a result, she explained to the FSC industry-based funds panel in

June how the regulator is looking to help EIF directors “raise the bar” with

standards that build on a new GFIA ‘code of conduct’.

The ability to launch without any regulatory downtime is not a new

concept – Luxembourg did it for seven years until 2012, and Caribbean

jurisdictions still offer this facility.

Gibraltar funds need to register 10 days after establishment - having

involved senior legal counsel, an authorised EIF director and, as appropriate,

a regulated funds administrator - or if they want to register before they start

conducting licensable activity, the FSC expects to turn an application

around within 10 days assuming documentation and information is

correct.

Mrs. Barrass told the 90+ industry professionals attending a

concurrent GFIA corporate governance seminar: “We are having to do

quite a lot of work to manage risks arising from [EIF] Directors not

properly taking account of the inexperience in practice of investors, not

fully being on top of the risks of fraud and not ensuring skill and

competence more generally - particular with respect to investments in

more esoteric markets and illiquid markets.”

Where those funds involve “investors who despite their

‘experienced’ status, in practice are heavily reliant on strong

governance of the fund to ensure their interests are protected”, EIF

directors need “to take their duties of fiduciary and due care, skill and

diligence seriously”, she said given the EIF swift-to-market ability.

The FSC’s prime consideration, the regulator reminded, was consumer

protection and Gibraltar's financial services sector reputation. Mrs. Barrass

noted that “unlike the larger jurisdictions, when the greater freedoms are

abused and we see fraud - investors exposed to greater risk than anticipated

- I think a disproportionate international spotlight is shone than when the

same things happen in the larger jurisdictions”.

All concerned with the EIF process needed to ensure the regime was

being used for its original intent and boards of directors and senior managers,

either in the fund or service providers (such as administrators or investment

managers), were “particularly important to the delivery of a sound risk

culture, she emphasized. “It is critical that they are able to demonstrate

adherence to sound risk management and integrity and competence in risk

governance”.

Lasry believes: “The great majority of firms and individual involved

with the funds sector are GFIA members, but worryingly of the 90 EIF

licensed directors only 21 are members, which is of concern.”

Surprise review of key fast-to-market process

3,500

3,000

2,500

2,000

1,500

1,000

500

220

200

180

160

140

120

100

80

60

40

0

Momentum in funds administration

No. of funds

Assets managed (£m)

1,944 2,2221,653 1,953

2,3722,717 2,476

2,919 2,4323,478 2,521

3,709

2008 2009 2010 2011 2012 2013

Source Gibraltar FSC Statistics

Net asset value Total asset value No. in funds administered

Continued from page 12

The market for initialpublic offerings (IPOs) inthe UK is booming again,with the number of listings hitting

a post-crisis high this year (51 as

at May 2014), with analysts

expecting as many as a further 15 to 20 more

listing in the market before the end of

August. Given that favourable conditions

for going public can vanish as quickly as

they arise, careful planning is critical. The

plan must consider the tasks and the timing

of the tasks required to go public and operate

in public. The company must be prepared to

perform in the glare of the public spotlight.

One mistake is to take a piecemeal

approach rather than considering the

comprehensive needs of the business in this

process. A good business case and the

preparation that goes into it provide a strong

foundation for managing the company well

once it has gone public. In addition, a

company that presents well to investment

bankers and analysts is better positioned for a

higher valuation.

Planning, preparation, expertise, and

teamwork—well in advance of registering the

stock—are the ingredients of a smooth IPO.

As soon as a company starts thinking about

going public, a best practice approach to pre-

pare for an IPO is to undergo an IPO readi-

ness assessment (well before the IPO process

starts) which can be used as a roadmap to

define a company’s IPO strategy and to iden-

tify critical gaps to fulfil listing requirements.

An IPO readiness assessment will generally

result in substantial savings by allowing the

company to close any gaps before the IPO

process starts, ensuring the IPO process runs

smoothly. To avoid confusion, chaos, and

unnecessary costs throughout the listing

process, the following must be done:

Establish good corporate governanceMany pre-public companies must upgrade

their governance structures, policies and

practices. Boards of public companies must

review goals and strategies, hire and com-

pensate management, and oversee risk—

among other duties. In turn, selecting the

right board and instituting robust

governance processes are also in the best

interest of management. These and other

expectations fall under good governance,

which are demanded by investors and

regulators.

Upgrade the finance functionA successful public company needs a sound

finance function with well-qualified people

(preferably with public company experi-

ence) and well-documented accounting

processes that can fulfil the demands of

public company compliance and reporting

regulations. As part of the listing process,

the company is expected to have in place a

comprehensive forecasting model that

allows the company to maintain up-to-date

budgets, forecasts and analysis by business

segments. To support the transition from

private to public company, the finance

function will need time and resources-

another reason to start preparing early.

Develop risk managementcapabilitiesNewly public companies face numerous

new risks in areas such as compliance and

reporting and with regard to legislation that

applies only to public companies, notably

the City Code. Public companies also face

an audience of investors, regulators,

analysts, and journalists who have become

sensitised to risk issues. This generates

greater risks to reputation, which can

IPOs


jeopardise the company’s base of customers

and investors.

Improve financial systems,processes, and controlsOne of the biggest changes to a company

once it goes public is the need for prompt

reporting and disclosures very soon after

the end of reporting period. The stringent

reporting deadlines imply that most private

companies must upgrade their financial

systems, processes, and controls to meet

new reporting, compliance, operational, and

risk management demands. This includes

the treasury and cash management function

as well as financial planning and

forecasting.

Address legal and tax mattersQuite often one or more aspects of the legal

or capital structure of a company must

change before it goes public, for instance

from a limited liability company to a PLC

Corporation. Specific tax issues may arise

such as shareholder tax status (pre and post

IPO), dividend flow, tax efficiency of

structure, the issuance of employee share-

options and more. This calls for expertise in

IPO tax issues, which becomes even more

complex when multiple jurisdictions are

involved.

Preparation is never wastedGoing public presents both an opportunity

and a need to improve capabilities.. Even if

eventually the company chooses to remain

private, the effort isn’t wasted. Most of the

actions taken to prepare to succeed as a

public company also position it to succeed if

it stays private. Operational, financial, and

managerial performance improve with

upgrades to policies, processes, controls,

governance, and risk management. The

company will also find it easier to work with

suppliers, obtain private capital, and attract

venture partners, if it remains private.

Given the number of tasks and techni-

calities involved, planning should begin at

least a year before the planned IPO — and

preferably earlier. This would enable the

company to issue the offering at an

advantageous time rather than rushing to hit

the market when it’s hot—and risk missing it

altogether.

London Calling – IsYour Company Ready?

By Eran Shay, Director, Financial Advisory Services,Deloitte Limited

Six steps to success in an IPOMinimally, these “short list” items should be in place:• Business plan to sell the company’s story to the publicmarkets• Financial forecast and audited financial statements• Adequate reporting systems, and documented processes• Corporate governance policies and practices required fora public company• Information required for the preparation of an IPOprospectus• Highly specialised IPO advisory team: lawyers, auditors,investment bankers, brokers, accounting advisors, financialprinters, public relations, registrars, etc.

www.deloitte.gi

The Gibraltar Yacht Registry began asa separate listing in 1997 and has experienced steady growth,currently holding a total of 810 vessels.

Within the total, the shortest listed yacht is

just 5.25m, and the longest is 65.79m.

But things are about to change. Whilst

officially the ideal is to grow the register by

around 8% a year, there is a drive to change

the mix and attract larger, mega yachts to

take on the Gibraltar Red Ensign flag.

In 2013, 814 yachts were listed on the

registry, just two more than a year earlier.

However, that disguises the number of new

vessels coming onto the registry; there were

74 fresh vessels listed in 2013 (4 more than

in 2012) and that level is being maintained

so far this year – just.

However, of the 814 registered yachts,

just 57 were over 24m in length. Rick

Montado, head of the Gibraltar Maritime

Administration (GMA) for the past 18

months, commented: “We seem to have

been attracting yachts in the 15-24m

category over the past two years or so,

because we have a relatively inexpensive

register cost of £250, with the most

competitive annual renewal cost of just

£25.”

Fees have remained unchanged for

more than 15 years and “are unlikely to be

revised in the medium term”, Montado, a 16

year career civil servant, opines. The

GMA 2013 budget was £1.2m and the

administration produced income of £1.4m.

“We have been profitable since the begin-

Marine Services


ning”, he notes, “although our aim is to be

cost neutral.

“Our registration facilities are compa-

rable with the UK registry, but low tonnage

taxes and other fees make the Gibraltar

registries an attractive proposition”,

Montado emphasises, adding: “Our aim is

not to be the biggest, but to be one of the

best registries.”

Competition comes from Cayman

Islands, which dwarfs Gibraltar’s registry,

and Isle of Man. “Their reputation is their

biggest asset; people – particularly with

large yachts - tend to go with the flag they

see and know, so we aim to get greater

recognition for Gibraltar”, he adds.

New services and packages are being

introduced to attract more of the bigger

yachts. As a result, the Yacht Registry is

in the final stages of preparation for

introduction of three new products: a new

fee regime for the Registration of very large

Mega Yachts, the ownership of vessels by

High Net Worth Individuals (HNWIs)

and a new ‘Yachts Under Construction’

registration category.

This latter facility - already available

for large commercial Gibraltar-registered

ships – “will be particularly suitable for

people who want to organise finance to

build their yachts, as it then will be possible

to gain mortgages, because the lender has

the security of a registered asset,” Diana

Soussi, Registrar of Yachts, points out.

“Very few competitive registries offer that

service.”

White list statusThe commercial register number remains

near-static at 322 vessels giving an average

listing of 3.3m tonnes. But the average age

of the Gibraltar-registered mixed fleet

of tankers, container feeder vessels and

general cargo ships, is 9 years, quite young

amongst its contemporaries.

Both the Gibraltar Yacht and Ship

registers benefit from comprehensive

maritime legislation based on English

Common Law, and while the GMA aims to

develop further maritime training in

Super yachts on the radar for Red Ensign registrationGibraltar has been involved in the registration of vessels for over 60years as an internationally recognised, high quality registryproviding an efficient and cost-effective service. It is an idealchoice for ship and yacht owners who want the confidence ofbelonging to a British Register and flying the Red Ensign

Ocean Village

marina and

neighbouring

Marina Bay

together offer

300 berths,

including 6 for

super yachts

over 80m

length

Continued page 20

Gibraltar for both officers and ratings, and

improve the quality of its registered ships

and their crew, it is improvement of

Gibraltar’s status on the Paris Memorandum

of Understanding “White List” of quality

flags that is key.

The GMA enjoys ‘Category 1’ British

Red Ensign Status that allows registration of

vessels of unlimited tonnage, type and

length, is included in the US Coast Guard’s

‘QUALSHIP 21’ list, and it has gained the

ISO 9001:2008 Quality Standard.

To cope with targeted yacht growth, the

Administration has increased staff levels by

nearly a third, bringing the total to 23. The

new ‘under construction’ status “applies to

vessels in yards anywhere in the world and

should appeal especially to those with mega

yachts”, Soussi points out.

As a first step, the GRA established in

2012 the Gibraltar Superyacht Forum, in

partnership with maritime stakeholders –

including shipping agents, crewing firms,

insurance, hotel, banking and bunkering

interests.

Members of the Forum are joining a

government-sponsored GRA stand that will

for the first time be at the Cannes Boat Show

in early September. “Cannes attracts people

who will also attend another boating event

shortly after in Monaco, but the yacht

registry there has a long waiting list”, Soussi

observes.

The majority of yachts are owned by

body corporates, which do not identify

beneficial owners, but “whilst we know that

most of the owners are from Southern

Europe”, she says, “there are several

Russian and Asian owners and a few from

Africa”.

Tax advantagesCompany ownership is particularly popular,

because privately owned vessels for

recreational purposes gain tax advantages

locally and provide anonymity, although it is

suggested this is probably not suitable for

yachts worth less than £150,000 as the

company will have annual maintenance

costs of around £1,000 pa. For larger

yachts, this can be a convenient way for a

foreign citizen to own a British registered

vessel.

“Vessels leave the registry for a variety

of reasons, but mostly when there is a sale to

an owner who wants to use another registry

that satisfies particular personal reasons,”

Soussi reports.

As local lawyers, Ellul & Co, note:

“Gibraltar has a deep sea port which can

berth all but the largest of ships. Activity in

the port has been brisk during recent years

and Gibraltar remains an attractive and a

convenient port of call at a strategic location

both for merchant vessels, cruise liners and

yachts.”

The firm points out: “Gibraltar

companies can be used to register fleets of

ships so that each ship is owned by a

different company. In this way the other

Marine Services


ships in the fleet will be protected against

debts owed by any of its sister ships.”

Speed of registration for ships and

yachts is a big plus; some firms say that

provided the survey is organised quickly,

a yacht can be registered in about one

week. Europa Trust Company Ltd, which

was established in Gibraltar in 1985 pro-

vides services to seafarers and points out

“There is no exact time period for yacht reg-

istration”, depending also on whether it is a

new boat or a resale.

“If the owners of the vessel are able to

provide all the documents required includ-

ing a tonnage measurement survey, the

Gibraltar Yacht Registry can take approxi-

mately 3 working days to provide a Marking

and Carving Note for us to issue a plate”,

explains Europa Trust Company business

development consultant, Brett Bridge.

He pointed out: “Gibraltar is not seen

by authorities or business counterparts as

some ‘exotic’ island in the middle of a vast

ocean serving as a convenient jurisdiction

just for tax purposes. It is a responsible,

progressive and competitive international

financial centre with a stable government,

established infrastructure and offers

excellent marine services.”

Gibraltar does not levy VAT on goods

and services as it does not form part of the

EU’s Common Customs Tariff area, which

means Gibraltar registered yachts pay no

VAT in Gibraltar (if the vessel is not based

in the territory), no tax on the sale of the

vessel and no Import Duty if the vessel is

not based in Gibraltar, he states. Import duty

on marine fuel is zero and goods delivered

to yachts in transit are also VAT-free.

More from the internetGibraltar Port is constructing a new wharf

that will provide 480m of extra outer wharf

berthing for large vessels and encourage

visits by super yachts. Individuals arriving

by yacht grew 2.2% last year.

Meanwhile, GMA boss Montado

believes “There is tremendous potential in

terms of commercial growth, helped by a

new Government led e-payment system

for registration services, including a

comprehensive database to handle all yacht,

seafarer and accounting transactions,

which will allow clients to register, seek

information and pay online.”

Ray Spencer

www.ellulco.comwww.europa.gi

Continued from page 18

Queensway

Quay Marina

has 185 fully

serviced berths

and can take

up to eight 30

metre and two

40 metre boats

Gibraltar International Bank (GIB),being launched by the government toprovide competition and facilities inthe wake of closure of a local high street bank,

has been provided with £25m initial capital.

That implies GIB has potential to lend

£160m to £200m for mortgages and business

borrowing before any further investment is

required, assuming the personal and business

loans meet immediate and extended liquidity

demands on a tiered risk basis, and there is

adequate security.

The move was prompted by the

intended closure from October of Barclays,

leaving NatWest as the only high street bank.

Delays with conversion of a former Main

Street discotheque into the GIB headquarters

building means the Bank is unlikely now to

open before early 2015. As a result, Barclays

has agreed to delay its departure until January.

GIB needs its premises to be complete

and operating systems fully in place before

the Financial Service Commission (FSC) will

grant a ‘banking licence in principle’, an

administrative procedure that falls near to the

end of in-depth FSC checks on the quality and

independence of the Board of directors, as

well as of senior staff and working processes.

Fabian Picardo, Gibraltar’s Chief

Minister, revealed in June the appointment of

seven independent non-executive directors,

including the present Chairman of Lloyds

Bank (Gibraltar), Albert Langston, and

former FSC chief executive, Marcus Killick,

who started the GIB licencing process before

retiring in February. The others include

lawyers, a businessman, and one government

official, Dilip Dayaram Tirathdas, the

financial secretary.

In May, Lawrence Podesta joined GIB

as chief executive from being chief operating

officer and deputy chief executive at

Lombard Odier (Gibraltar), the Swiss-owned

private bank, and Derek Sene moved to

become GIB’s chief operating officer after 40

years with Barclays in Gibraltar. Several

Barclays staff are expected to be offered jobs

with GIB, which will provide full retail

banking services.

Albert Isola, Minister for financial

services, assured that “All other aspects of the

new Bank including its technology platform,

its management team and its systems and

operations are on course to be concluded in

anticipation of the building works being

completed”.

It is unclear how GIB will ‘co-operate’

with, and ‘complement’ the State-owned

Gibraltar Savings Bank (GSB), which intends

to offer enhanced and new services, including

“instant access current-account facilities for

the payment of Government bills by standing

order and by direct debit and facilities for the

electronic transfer of funds between bank

accounts.”

GSB will introduce ATM cash machines

and a ‘VISA approved’ debit card, to bring

about a ”transformation” this financial year as

it starts to make use of the latest banking tech-

nologies, with further branches and public

counter positions envisaged, Picardo noted.

GIB, unlike GSB with reserves of some

£11m projected to grow to £20m by end-

March 2015, is a credit institution subject to

FSC licensing and regulation.


Banking

New ventures to meet growing need

Atlantic Suites has become a more popular

destination in Gibraltar since the opening of

theatlantic cafe located on the ground floor. Apart from

the café, theatlantic also has a bakery and bar, which

together with a branch of Marks & Spencer Food and

Wine, all complement the Atlantic Suites Serviced

Apartments in the building and, of course, the Atlantic

Suites Gym and Spa. Visitors, residents and office-

workers of Atlantic Suites and the Europort complex

next door have everything they need on their doorstep.

The café’s general manager, Adrian Bagu, talks about the

challenges of the start-up and rapid growth of theatlantic

and how enthusiastically customers have reacted to this

new-style venue in Gibraltar.

“We started with a soft opening in December with the

café, bakery and M&S Food and Wine before adding our

sushi offering and special cocktail evenings in time for our formal opening

in March. I joined in November so I had a lot to do, recruiting staff, setting

up systems, preparing menus, and learning the M&S special processes

which maintain their extremely high food and wine quality.

The actual venue was ready when I arrived and it was very exciting to fill

the airy, modern space with its comfortable armchairs and sofas as well as

the chic café and bar tables and attractive artwork. It is

a very special venue so I wanted to provide the highest

standard of service. I worked in hospitality in

Amsterdam, Florida and Britain before returning to

Gibraltar and know what attracts a cosmopolitan clien-

tele. I was particularly pleased when we agreed with

Tengoku, the popular Japanese restaurant in

Sotogrande, that their master sushi chef would come

into Atlantic Suites daily to prepare his famous fresh

dishes for our customers. As the only place serving

sushi in Gibraltar, it has been extremely popular. To

meet demand, we have also started outside catering for

distinctive lunches.

With many offices around us, takeaways are important

and we offer special sushi combo boxes as well as tasty

baguettes, healthy quiches, salads and soups. Of course,

people can also buy their own ready-meals with great-value wines and

everything they need to “dine in” from our M&S shop. The only downside

to my job is working alongside the too-tempting M&S Extremely

Chocolatey Biscuits!

I am personally thrilled at the reception we have had in our first 6 months

and the very positive feedback from our customers.”


ABACUS FINANCIAL SERVICES LIMITED Licensed by the FSC no.702481 www.abacus.gi

PRIVATE WEALTHCORPORATE STRUCTURINGTRUSTSFUNDS

YOU TRUST US TO DELIVER VALUE FOR YOU SINCE 1974

CALL US ON +350 200 78777or email: [email protected]

theatlantic cafe at Atlantic SuitesAdvertising Feature

follow us: .com/theatlanticcafe com/atlanticsuites www.theatlantic.gi

Personal motor rates should start rising again in the second half of2014 as the recent round of pricecutting starts to hit insurers’ results.

That is the message from industry

experts and market commentators after a

difficult year for motor insurers.

The talk comes despite the UK

personal motor market as a whole returning

to underwriting profitability in 2013 after at

least a decade of losses. Figures from

accounting firm Deloitte show that the

market reported a combined operating ratio

(COR) of 99.4% for the year.

But underlying profitability, excluding

prior-year reserve releases, worsened

because of the price war.

Online broker IGO4 commercial

director Karen Hogg says: “It is hard for me

to see how, when the premiums have

dropped so significantly, insurers can still

expect to achieve the same results in what is

already a very difficult market to make

money.”

Lloyd’s motor insurer ERS commercial

director Sam Hudson adds: “Everyone has

reported rates coming down. You only have

to look at most companies’ CORs to see that

it can’t last forever.”

No big fall in claimsRates fell sharply in the past year as insurers

anticipated the effects of legal reforms as

well as anti-fraud and pricing technology.

Insurance


The Towers Watson/Confused motor price

index shows that rates fell by 27% since the

Legal Aid, Sentencing and Punishment of

Offenders Act 2012 (Laspo) was introduced

in April 2013.

Although insurers used the reforms

and technology improvements to justify the

cuts, there is little evidence of a big

reduction in motor claims.

The average cost of settling a personal

motor claim in Q1 2014 was £2,701,

according to the ABI, compared with £2,605

in the same quarter last year.

And there were 731,000 claims in the

first quarter of 2014, compared with

790,000 in last year’s first quarter.

There have been casualties already.

RSA plans to drop 800 personal motor

brokers to restore profitability to its book

after 2013’s 111.7% personal motor COR.

Ageas UK, one of the few UK-based

insurers to give a breakdown, saw its motor

COR worsen to 101.6% in the first quarter

of 2014 from 99.6% in the first quarter of

2013.

Some companies are taking action.

Motor insurance group Hastings chief

executive Gary Hoffman says his firm has

Motor rates to hardenamid insurer woesThe UK personal motor market returned to underwriting profitability in 2013 for thefirst time in at least a decade, but this position is deemed unsustainable withoutprice increases writes Saxon East and Ben Dyson from the Insurance Times

made “selective small price increases”. But

most expect concerted efforts in the second

half of the year.

Deloitte insurance partner James

Rakow says: “If the industry doesn’t start to

increase premiums, the overall results that

we will see in 2014 and beyond could

decline.

“We would see the likelihood of

premiums going up being quite strong at

some point in the latter half of the year.”

Deloitte’s figures show why action is

needed. The 2013 underwriting profit was

caused by reserve releases, which cut the

COR by 9.9 points.

Without the releases, the COR would

have been a much less flattering 109.3% – in

turn 0.8 points worse than 2012’s underlying

COR of 108.5%.

Rakow adds: “The direction is now

pointing towards a challenge for the industry

to maintain profitability.”

Insurance

Insurance Times is a UK print and online publicationbased in the City, that covers the UK generalinsurance market. Its readers are key decision-makers, business placers and principals in brokers,insurers and service suppliers

www.insurancetimes.co.uk

130%

M Best dataAeloitte analysis of Dce: ourSTOMAL NUK PERSO

Current year C

M Best dataCOROR T

ORll-year CA*ORCurrent year C

123.6%123%

80%

90%

100%

110%

120%

1

-year rxcludes priorE*

1

eserve movements-year r

99.4%

%

2006200570%

200820072006

20102009

2012

£

2011

2013


Rapid growth in the number ofGibraltar-based pension schemes –primarily from transfers from the UKinto Qualifying Recognised Overseas Pension

Schemes (QROPS) – has provided the

motivation to regulate all the jurisdiction’s

pensions service providers.

“In the last 18 months, thousands of

pensions with over £½bn in assets, have been

transferred to Gibraltar and the number is still

growing rapidly,” said Steven Knight,

Gibraltar Association of Pension Fund

Administrators (GAPFA) chairman.

He told Gibraltar International: “The

average pension pot for QROPs transferred to

Gibraltar is thought to be above £200,000, but

the Financial Services Commission (FSC)

doesn’t collate these figures at present, so it’s

our best guess from talking to the main

suppliers here.”

There is a need for enhanced education

for those in the Gibraltar pension sector,

Knight confirmed, given that 18 months or so

ago there was hardly any pensions activity in

the jurisdiction.

There are now over 5,000 pension

schemes being handled in Gibraltar and it is

estimated that more than 100 people are

employed in the sector, compared with a

couple of dozen or so just two years ago.

Neil Perera, FSC head of fiduciary

services, told Gibraltar International: “We are

Pensionsbeginning a 4-week consultation exercise, in

conjunction with government, with pensions

trustees, administrators and intermediaries

(which have to be corporates rather than

individuals), and we do not expect to take

very long before implementation of new

regulatory rules.”

The focus will be on protection of

pension scheme members’ interests, as well

as the reputation of Gibraltar’s finance sector.

The new rules - to include anyone who

oversees pensions functions and importantly,

who manage the assets - will cover the types

of investments permitted, transparency of

fees, and reporting of investment perform-

ance and yields to members at least annually,

but often quarterly, and to make the informa-

tion meaningful by showing the expectation

of financial pots at pensionable age.

No alarm raisedPerera explained: “It is very important that

there are robust rules in place, rather than a

light touch regime with only guidance given.”

But he emphasised: “There has not been any

event or failure that has raised alarm bells.”

The new regulatory rules, will require

schemes to reflect rules of the original

Tightening rules for ‘exemplary’ pensions homeWhen 120 people from Gibraltar’s pensionssector attended the jurisdictions firstindustry-specific training seminar in thespring, most would not have guessed thatthey shortly were to have theirprofessional knowledge and suitabilityquestioned, as part of a move to ensureGibraltar is seen as “an exemplaryjurisdiction for pensions business”

pension home country – the UK’s HMRC, and

in Australia and Dubai, for example.

“There is a drive to bring certainty for

the pensions industry and it is a priority for

us”, Perera confirmed. The changes will

extend to pensions FSC powers under the con-

duct of business regulation for fiduciary serv-

ices. Crucially this will include the need for

recognised continuous training of all staff, and

consideration of individuals’ suitability to

carry out pensions business.

Knight insisted: “There is a commitment

to training courses at various levels and when

I talk to people around the world, they think

we are at the forefront of pensions

handling.”

Gibraltar-based trust company

Corinthian Pension Trustees gained an FSC

licence at end-May and now offers its Apollo

QROPS with administration provided locally

by Consort Pension Administration specialis-

ing in QROPS. Corinthian chairman John

Britton said: “We are very pleased with the

way Gibraltar has developed as a QROPS

jurisdiction and we are delighted to now be a

part of this expanding market.”

Consort founder and managing director

David Erhardt, who previously was with STM

Fidecs in Gibraltar as head of pensions, said:

“All the services are provided by Gibraltar

companies with no outsourcing overseas,

which promotes employment opportunities

and the ability for local regulation.”

Most litigious areaPeter Davis, a pensions actuary and founder of

PenTech Group, which has offices in Isle of

Man, Guernsey and UK and has provided

pensions technical support for 39 years, told

the Gibraltar seminar: “I am genuinely con-

cerned at the apparent lack of pensions knowl-

edge in various jurisdictions from the Isle of

Man, Malta, Guernsey and Gibraltar, for

example. I am working with HMRC and

regulators in these countries.”

Noting that “pensions is one of the most

litigious areas of financial services involving

providers, advisors and trustees’ handling of

pensions”, Davis insisted that greater

regulation “will not be about plaques on walls

and the administration being done in Jersey

and Guernsey; there will be a need for a

significant presence in the jurisdiction, not

pension scheme documents sent in a box to

another place for handling”.

He believed there should be licensing of

pension providers and of independent

financial advisors (IFAs) generally and

declared: “I am told it is coming here to

Gibraltar and it will be music to their [HMRC]

ears”.

Stewart Davies, CEO of Momentum the

pensions provider with offices in the Isle of

Man and Malta, said the decision to open a

Gibraltar office recently was in response to

“adviser demand to launch a Gibraltar

QROPS”.

Throughout the reported seven months

long licensing process “We were extremely

impressed with the thoroughness of the FSC,

and their commitment to having a robust,

Gibraltar based operation”, Davies declared.

He welcomed FSC consultation “on the need

to have a real presence in the jurisdiction”.

All trustees of pensions schemes are

covered by Class 7 professional trustee

licences, but in future there will be a specific

pensions trustee licence and more specific

rules. As Perera remarked: “There is

enormous potential for growth and we are

looking for that, but we must ensure we don’t

let the bad people in. We want Gibraltar to be

seen as an exemplary jurisdiction for pensions

business.”


Pensions

28 Gibraltar International www.gibraltarinternational.com www.gibraltarinternational.com Gibraltar International 29

B U S I N E S S R O U N D U PSociete Generale PrivateBanking Hambros(SGPBH) Gibraltar, granted the first depositary licence by theFSC

The Financial Services Commission

(FSC) has granted the first

depositary licence to Societe

Generale Private Banking Hambros

Gibraltar under the Alternative

Investment Fund Managers

Directive (AIFMD).

The role of ‘depositary’ for

SGPBH Gibraltar is fundamental

and potentially very significant, as

one of the key AIFMD

requirements is that AIFs appoint a

depositary. Whilst it is possible for

depositaries to be established

elsewhere, there are a number of

clear advantages for the depositary

support to be established in

Gibraltar. The depositary is the key

independent party in AIFMD and is

charged with protecting the

investors in each AIF.

Whilst Gibraltar is already a

reputable and attractive domicile for

investment managers, with its

strong foundations in the investment

management and funds industry,

this news will no doubt make the

jurisdiction even more appealing

and well placed to attract increased

funds business.

Landmark GibraltarInsurance and PCCrulingGibraltar law firm Isolas is pleased

to announce that it has acted as legal

advisors on the first ever transfer of

long term insurance business

undertaken by a Gibraltar licensed

insurance company

structured as a protected

cell company (PCC).

Associate, Christian

Caetano, advised PEL

Altraplan (Gibraltar)

PCC Ltd on its

unprecedented transfer of

insurance business from Gibraltar to

Ireland. The landmark ruling of the

supreme Court of Gibraltar was

possible as a result of the provisions

of the Financial Services (Insurance

Companies) Act and the protected

Cell Companies Act.

Mr. Caetano commented:

“This was the first time that the

Gibraltar Courts had been asked to

approve a scheme for the transfer of

a Gibraltar insurer’s long term

business, and also the first such

transfer from a PCC to a non-PCC

entity. This is therefore a highly

significant ruling in the areas of

insurance and PCCs, and one which

will be welcomed locally and

internationally. As

Gibraltar’s financial

services industry

continues to thrive,

this decision serves

to highlight the

robustness of our

legislation and

regulator, as well as reinforce the

strengths of the PCC vehicle.”

Gibraltar Finance Centreexhibit at GAIM 2014 inMonacoThe Finance Centre, in conjunction

with the Gibraltar Funds &

Investments Association (GFIA)

attended and exhibited at the Global

B U S I N E S S R O U N D U P

Alternative Investment

Management (GAIM) 2014

conference, held at Le Meridien

Beach Plaza, Monaco in June.

Billed as the 2014 Inspiration

and Networking Event Experience

and celebrating its 20th year of

connecting hedge fund investors

and managers, the Minister for

Financial Services and Gaming, the

Hon. Albert Isola MP, delivered the

welcome address.

Over 400 delegates attended

the three day event, and Gibraltar

Finance Centre Senior Executives,

Phillip Canessa and Victor Galliano

told the audience of the benefits of

choosing Gibraltar as a domicile of

choice within the European Union

(EU) single market for the

establishment of funds, hedge

funds, asset and hedge fund

managers requiring the facility to

passport throughout the EU and

within AIFMD.

GII on-line exams in GibraltarThe Gibraltar Insurance Institute

(GII) is pleased to announce that it

is offering a new on-line exam

facility for its members. This

technology will enable insurance

exams to be sat at the Bleak House

Training Institute, with a choice of

four sittings available each month

and instant results.

The GII President, Neil

Entwistle commented:

“This is a huge step

forward for the industry

here in Gibraltar and this

facility will help members

achieve professional qualifications

much quicker, rather than being

restricted to taking exams in

October and April, which was the

previous arrangement.”

Gibraltar insurancecompany open SwissbranchSt. Bernard Assure Limited, a

Gibraltar based insurance company

have recently opened a branch in

Switzerland.

One of the unique

characteristics of the company is

that it uses an entirely easy-to-use

online platform for fast and secure

auto insurance purchases, with a

24/7 Swiss customer support centre.

No other insurance company in

Switzerland offers this service.

The internet is the second most

popular source of car related

information in Switzerland and auto

insurance is about to become a

major online commodity.

Company CEO, William

Fawcett, commented: “Buying

insurance is never going to be fun,

but St. Bernard makes it as

uncomplicated, quick and

transparent as possible. Our

website was specifically designed

not to look like traditional insurance

sites, but rather to be more engaging

and dynamic for tech-savvy

consumers.”

Suite 24, Watergardens 6,Gibraltar Tel.+350 200 79013 Email [email protected]

www.europa.giFinancial Services Commission Licence No 00108B Gibraltar Registration No 10511

l Worldwide Vessel Registrationl Ownership Administration, Procurement of Marine Insurance and vessel operating permits

l Radio Licensingl Marine crew licenses and payment set-ups

International Business Solutions

ISO 27001 Information Security Management Systems

ISO 9001 Quality Management Systems


Gibraltar Association of Pension Fund Administrators (GAPFA)

Steven Knight, Chairman, Tel: + (350) 200 40466

Email: [email protected]

Association of Trust & Company Managers (ATCOM)

Marc X. Ellul, Chairman, Tel: + (350) 200 70921


Bar Council

David Dumas, Chairman, Tel: + (350) 200 59026 / 79075

Email: [email protected] [email protected]

Gibraltar Association of Compliance Officers (GACO)

Ivan Perez, Chairman, Tel: + (350) 200 73520


Gibraltar Bankers’ Association (GBA)

Christian Ga

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